Death of renewable energy in Pakistan

The government’s recent policy changes on renewable energy development have dealt a grievous blow to a sector that had promised a new dawn of clean and cheap power for an energy starved Pakistan. While the rest of the world gallops ahead embracing wind and solar energy, our energy mandarins have thought otherwise. While the advanced industrial nations like Germany and Denmark produce 42 percent and 14 percent of their electricity by wind alone, we are stuck at less than 1 percent. 27 percent of Germany’s electric power is being produced from renewables and they intend to increase that percentage to 80 percent by 2050.

In USA, the contribution of wind power to national grid is 82183 megawatts which is approximately 6 percent of total electricity production of the country. China has the world’s largest installed capacity of hydel, wind and solar power that accounts for 24 percent of its electricity generation. It produces 63 percent of the total world production of photovoltaic cells.

Even in a Pakistan’s per capita electricity consumption of 540 kwh is one of the lowest in the world, a fact that highlights the gulf that separates the rest of the world from Pakistan. The national energy mix ratio that should be an ideal balance between the renewable and the fossil fuel based power generation sources is an accurate reflection of a country’s energy scene. An energy mix skewed in favour of fossil fuels for an oil and gas importing country prognosticates energy crisis showcasing high cost of electricity for end consumers and high import bill. Pakistan’s energy mix that features 64 percent thermal, 30 percent hydel, 3 percent nuclear and less for wind, solar, and coal cries out for a review. With the present share of wind and solar power of 640 and 400 MW in national grid which is less than 1 percent of national electricity generation, one would have expected that the government would go all-out to enhance that percentage closer to global averages of 15-20 percent. No such luck here in Pakistan where the LNG and coal lobbies have elbowed out the wind and solar to the margins through mercurial policies and delaying tactics inimical to the interests of the potential investors.

At a time when the government should be offering attractive terms to investors interested in solar and wind projects, it is doing exactly the opposite

Initially in 2012, the government showed some interest in wind projects considering the mouth watering potential of the 43000MW of wind power in Gharo-Jhimpir Wind Corridor. With wind risk granted to the investors in the first three wind projects i.e. Jhimpir, and Foundation Wind I and II the stage was set for an expansion of the wind farms in the entire corridor. After initial cost plus based projects with wind risk coverage, the government graduated towards upfront tariff withdrawing the wind risk. With a Return on Investment (ROI) of 17 percent, the projects were still lucrative for investors and one expected that the government would persist with these policies for some time till the share of wind in national energy mix exceeded at least 3-5 percent. No such luck in Pakistan. Not only did the Ministry of Energy lean upon NEPRA to do away with the upfront tariff it created ambiguity by indicating the reduction of the concession periods from 25 to 15 years and doing away of the investor friendly ‘take or pay’ provision. By indicating a reference tariff of Rs 6.7/Kwh initially in 2017 and then creating further confusion about the competitive bidding, a large number of willing investors were actively discouraged from charting a course in the terra incognita of constant policy shifts. Several investors who had acquired ‘Letters of Intent’ (LOI) for the wind projects based upon cost plus tariffs, concession periods of 25 years and ‘Take or Pay’ provision eying ROIs of 15-17 percent were forced to abandon their projects having invested heavily in project feasibility and development.

Why is the government moving the goal posts for the wind and solar projects continually? It is a question that begs a frank answer considering the undue concessions being offered to the coal and the LNG power project developers. Why would the government not encourage clean and cheap wind and solar power generation despite being beset with crippling energy shortages.

Interestingly, the ‘good Samaritan’ reasons adduced in support of the government’s chameleon like policy shifts are reduction in the power generation costs for end consumers and elimination of burdensome capacity charges. Amazingly, the capacity charges are being reduced for renewables whereas the fuel guzzling old plants being run by public sector are being munificently accommodated.

There is a need to declare a national energy emergency with immediate announcement of a national energy mix policy having a minimum of 20 percent of wind and solar share with a clear road map to achieve the targets within stipulated timelines. NEPRA and AEDB should also be allowed to work independently and freely

The present opacity in the policies considering wind and solar energy are sounding the death knell for the nascent industry, which promised cheap and environmentally clean energy without a dependence on imported fuel. In 2006, the government had announced an increase in the share of wind energy in the national energy mix to five percent by 2030. With the present resort to competitive bidding and curtailed concession periods that objective appears unachievable now. The Alternative Energy Board (AEDB), a one stop window for wind, solar, and biogas power projects, has been ordered to be merged into PPIB, another indication of the government’s lack of seriousness in encouraging the renewable energy. AEDB being the sole representing agency of the federal government that was established in May 2003 with the main objective to facilitate, promote and encourage the development of renewable projects in the country has been put into a limbo, effectively stifling the development of wind and solar projects.

The reliance yet again on imported fossil fuels like LNG that are being touted as the panacea to our energy woes is highly risky considering the volatile nature of the oil prices in international market with whom the LNG price is pegged. At a time when the government should be offering attractive terms to investors interested in solar and wind projects, it is doing exactly the opposite. Instead of improving the power evacuation grid and minimising the transmission losses and power thefts, the government is imposing further burden on the grid by allowing inefficient public sector power plants to consume a portion of grid at high cost to national exchequer and public. Considering the inability of National Transmission and Distribution Company to evacuate the generated power a ‘national grid overhaul emergency’ would have been declared in any other country. While the electricity evacuation problems elsewhere trouble the government, it does not show the alacrity to maximise grid evacuation advantages where conditions permit.

A classic example is the unutilised grid capacity of 50 MW wind farms in Jhimpir and Gharo. Due to technology compulsions of 30 percent efficiency wind turbines only 30MW of the power is generated out of an installed capacity of 50MW. The remaining 20 MW could be ideally generated by integrating solar energy. The government is not encouraging even this easily doable innovation that could utilise 20 percent of its unutilised grid capacity on wind farms.

There is a need to declare a national energy emergency with immediate announcement of a national energy mix policy having a minimum of 20 percent of wind and solar share with a clear road map to achieve the targets within stipulated timelines. NEPRA and AEDB should also be allowed to work independently and freely. Along with an active encouragement of the renewable energy sector, with the wind and solar in the lead role, an urgent overhaul of the national power evacuation and distribution grid is de rigueur. There is no gainsaying the fact that the death of the renewable energy is the death of our national energy dream.